2018 Final Rating Review Report - FMDQ Group...Company Profile 5 Financial Condition 9 Ownership, Mgt & Staff 14 ... Lafarge S.A. France became the majority shareholder of WAPCO and

Lafarge Africa Plc

2018 Final Rating Review Report

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2018 Corporate Rating Review Report

Lafarge Africa Plc Rating Assigned:

Bbb+

This refers to a company with satisfactory financial condition and adequate

capacity to meet obligations as and when they fall due.

Outlook: Stable

Issue Date: 6 September 2018

Expiry Date: 30 June 2019

Previous Rating: A

Industry: Building Materials,

Cement, Aggregate & Concrete

Products

Outline Page Rationale 1

Company Profile 5

Financial Condition 9

Ownership, Mgt & Staff 14

Outlook 17

Financial Summary 19

Rating Definition 22

Analysts:

Olusegun Owadokun, CFA [email protected]

Ojuru Adeniji [email protected]

Isaac Babatunde [email protected]

Agusto & Co. Limited

UBA House (5th Floor)

57, Marina

Lagos

Nigeria

www.agusto.com

RATING RATIONALE Agusto & Co. hereby revises the rating of Lafarge Africa Plc (“Lafarge Africa”,

“Lafarge”, “LAP” or “the Company”) to “Bbb+”. The revised rating is underlined

by the strong parental support of the Company’s principal shareholder

(LafargeHolcim Group), good market position as well as qualified and

experienced management. Nonetheless, the assigned rating is constrained by

weak profitability, inadequate working capital and high leverage which have

constituted a drag on Lafarge’s cash flow position in the last few years.

Lafarge Africa is one of the leading building materials solutions companies in

in sub-Saharan Africa with strong presence in Nigeria and South Africa. With

a current installed capacity of 14.1 million metric tonnes per annum (mmtpa),

aggregates capacity in excess of 5 mmtpa and ready-mix concrete capacity of

over 3.5 million cubic meters, LAP is the second largest cement producer in

Nigeria by capacity and sales volumes based on half year 2018 results. The

Company has a wide distribution network with over 133 key distributors and

excess of 400 trade partners spread across Nigeria.

LafargeHolcim Group (“LafargeHolcim” or “the Group”) is the largest

shareholder with 76.3% equity holding held through its various subsidiaries.

LafargeHolcim is the dominant global leader with an installed cement

production capacity of 353.3 mmtpa with 2,300 operating plants in over 80

countries in the manufacture of cement, aggregates and ready-mix concrete.

The Group continues to offer strong parental support (both technical and

financial) to Lafarge Africa, as demonstrated by the conversion of one of its

subsidiaries’ quasi-equity loan to equity in the rights issue concluded in

December 2017.

In spite of the about 18% contraction in the demand for cement in 2017 due

to lower infrastructure spending, declining volumes in key off-taker markets

such as real estate and construction coupled with the weak consumer

spending, Lafarge Africa posted a turnover of ₦177.2 billion in the financial

year ended 31 December 2017 (FYE 2017), representing 103% increase over

prior year’s revenue. The growth was attributed mainly to the impact of the

2 2018 Corporate Rating Review Report

Lafarge Africa Plc

consolidation of United Cement Company of Nigeria (UNICEM) and Atlas

Cement Company Limited (Atlas) operations with the Company in addition to

the rise in cement prices during the review period. Disaggregating the

consolidation effects of the UNICEM/Atlas merger, the Company’s revenue

effectively grew by 6% year-on-year (yoy) in 2017.

Although cost of sales as a percentage of revenue and operating expenses to

sales ratios dropped marginally due to the the growing use of cheaper

alternative energy sources and enlarged revenue base, the Company recorded

a loss before tax of ₦7 billion occasioned by the high and rising finance costs

amounting to ₦41 billion in FYE 2017. Thus, interest expenses to sales ratio

rose to 23% in 2017 (2016: 7.7%), which is far higher than our maximum

benchmark of 5%. Thus, Lafarge’s profitability indices such as profit before

tax margin, return on assets and return on equity were all negative during

the year under review.

While Lafarge Africa generated an operating cash flow (OCF) of ₦48.9 billion

in 2017, the Company’s OCF was insufficient to cover returns to providers of

finance of ₦57 billion comprising interest (72%) and dividend (28%).

Although Lafarge Africa Plc’s operating cash flow was relatively better in

2017, Agusto & Co. is of the view that the overall cash flow profile of the

Company requires improvement

As at FYE 2017, Lafarge posted a short term financing surplus of ₦172 billion

and a long term financing need of ₦192.3 billion, in line with the trend over

the last five years. As a result, the Company posted an overall working capital

deficiency of ₦20.3 billion as at same date. Although Lafarge’s net debt to

total assets ratio which stood at 56% as at 31 December 2017 is considered

satisfactory, the Company’s interest coverage ratio of 1.2 times fell short of

expectation.

The unaudited accounts of Lafarge Africa for the six months ended 30 June

2018 (H1’2018) showed that the Company’s turnover rose by 92.8%% yoy1 to

₦100.4 billion (H1’2017: ₦52 billion). In the same period, cost of sales to

revenue ratio rose to 62% (H1’2017: 56.4%) due to higher general production

expenses, while operating expenses to sales ratio remained stable at 14%.

Lafarge’s interest expenses to revenue rose yoy to 22% in H’2018.

Consequently, the Company posted a significantly lower profit before tax

margin of 3% during the half-year period (H1’2017: 32%). Although the

Company generated a positive OCF of ₦20.9 billion, this was insufficient to

cover interest and dividend payments of ₦34 billion during the H1’2018.

1 The growth was due mostly to the increase in volume sales and higher cement prices


Lafarge Africa Plc

Hence, LAP resorted to short term borrowings to cover the shortfall. In

addition, interest coverage which stood at 1.3 times as at H1’2018 fell short

of our expectation.

On the back of the success of the rights issue of ₦131 billion concluded in

December 2017, Lafarge Africa plans to raise additional capital of ₦90 billion

through another rights issue before the end of 2018. The proceeds would be

used to repay short term borrowings. Agusto & Co. expects the re-

capitalisation exercise to moderate the Company’s leverage with a

concomitant positive effect on profitability in the medium term. Nonetheless,

this may not have material impact on LAP’s working capital and cash flows

unless the capital raising leads to fresh cash being injected into the

Company.

On account of the strong competition in the Industry, we expect the pricing

environment to remain stable in the short term. Agusto & Co. also expects

the Company’s operational performance to be sustained with improving

volumes on the back of the improving macroeconomic climate as well as the

Company’s deliberate strategy to sustain capacity share.

Based on the aforementioned, we have attached a stable outlook to Lafarge

Africa Plc.


Lafarge Africa Plc

Figure 1: Strengths, Weaknesses, Opportunities & Threats

•Strong parental support from LafargeHolcim Group

•Diversified product offering

•Good market position

•Qualified & experienced management team

•Wide distribution network

Strengths

•Weak profitability

•Inadequte working capital

•High leverage

Weaknesses

•Nigeria's huge housing deficit

•The huge infrastructure gap in the country

•Opportunities for export to the West Africa sub-region

Opportunities

•Sustaining market and capacity shares given the growing competition in the Industry

•Low consumer purchasing power

•Volatility in gas supply

Threats


Lafarge Africa Plc

PROFILE OF LAFARGE AFRICA PLC Overview & Background

Lafarge Africa Plc (a subsidiary of LafargeHolcim Group) is a leading building materials company, specialising

in the provision of diversified building material solutions in Africa. LafargeHolcim Group is the dominant

global leader in the manufacture of cement, aggregates and ready-mix concrete. LafargeHolcim Group came

into existence in July 2015 following the merger of Lafarge S.A. France with Holcim Group of Switzerland.

The Group has an installed cement production capacity of 353.3 million metric tons per annum (mmtpa) with

2,300 operating plants in around 80 countries.

Lafarge Africa Plc (formerly Lafarge Cement Wapco Nigeria Plc) was incorporated in Nigeria on 24 February

1959 and commenced operations on 10 January 1961 with its plant in Ewekoro, Ogun State. The second

factory was established in Sagamu, also in Ogun State in 1978. In 1979, the Company was listed on the

Nigerian Stock Exchange and is the second largest cement manufacturing company in Nigeria by cement

production based on H1’2018 results.

With an initial installed capacity of 200,000 tons per annum at inception, the Company has a current

installed capacity of 14.1million metric tonnes per annum (mmtpa), which is projected to grow to 18 mmtpa

by 2020. Following the take-over of Blue Circle Industries Plc. in 2001, Lafarge S.A. France became the

majority shareholder of WAPCO and this subsequently led to the change in the Company’s name to Lafarge

Cement WAPCO Nigeria Plc in 2008. In 2011, Lafarge Ready Mix Nigeria Limited commenced operations as a

wholly owned subsidiary of the Company. In September 2014, Lafarge Cement WAPCO Nigeria Plc was

renamed Lafarge Africa Plc., as a vehicle for the acquisition of Lafarge Group’s equity holding in AshakaCem

Plc (AshakaCem), Lafarge South Africa Holdings (Pty) Limited (LSAH), Atlas Cement Company Nigeria Limited

(Atlas) and its indirect holding in United Cement Company of Nigeria Limited (UNICEM).

Figure 2: History of Lafarge Africa Plc

1959 -1964

• Incorporated as West African Portland Cement Plc.

• Commenced cement production and increased installed capacity to 400,000 tons per annum

1965 -1979

• Converted to a Public Company listed on the Nigerian Stock Exchange

• Installed capacity increased to 700,000 TPA

• Commissioned second factory in Sagamu, Ogun State

1980 - 2001

• Lafarge S.A, Group takes over ownership of Blue Circle Industries Plc.

• Upgraded Sagamu plant to 800,000 TPA

• Improved production process and technology

2002-2010

• Replaced Ewekoro plant with modern state of the art technology.

• Commenced expansion process in 2008 to grow market share

• Changed name to Lafarge Cement WAPCO.

2011-2016

• Introduced the Readymix business

• Commenced strategic business growth through expansions and acquistiocns of LSAH, AshakaCem, Atlas and Unicem

• Increased shareholdings in Ashakacem and Unicem

2017-2020

• Implementation of business restructuring exercise in a bid to sustain market share

• Grow the readymix business segment

• Explore export opportunities to moderate foreign currency shocks


Lafarge Africa Plc

Ownership Structure

LafargeHolcim Group is the majority shareholder of Lafarge Africa Plc with 76.3% shareholding held through

its subsidiaries, namely: Caricement B.V. (48.5%); Associated International Cement UK (18.8%); and Lafarge

Associated Nigeria Limited (9%). Other minority shareholders jointly own the balance of 23.7%. The

Company’s ownership and holding structure is depicted in Figure 3.

Figure 3: Holding Structure of Lafarge Africa Plc

Source: Lafarge Africa Pl 2017 Audited Accounts & Management Presentation

LafargeHolcim

Group

Lafarge Associated

Nigeria Ltd

Associated Intl.

Cement UK Caricement

B.V.

9% 18.8% 48.5%

Lafarge Africa Plc

(Nigeria) Minorities

Wapsila

(Nigeria) AshakaCem

(Nigeria) Lafarge Ready Mix

(Nigeria)

CBI Ghana

(Ghana)

76.3%

23.7%

100% 100% 100% 35%

Lafarge SA Holdings Ltd

(South Africa)

Lafarge Industries Ltd Lafarge Mining Ltd

100%

89% 74%


Lafarge Africa Plc

Legal & Operating Structure

Lafarge Africa Plc primarily engages in the manufacturing and marketing of cement and other cementitious

products such as Ready-Mix concrete, Aggregates and Fly-Ash. The Company offers a wide range of products

under the brand names of Ashaka, Elephant, UniCem, Readymix Concrete, and Aggregates as well as

Buildcrete, DuraBuild, DuraPozz, FastCast, PozzFill, Powercrete Plus and SuperPozz. LAP’s offerings are

channelled through trade customers and contractors. Lafarge Africa Plc operates mainly in Nigeria and South

Africa through six affiliated companies with an installed cement capacity of 14.1 mmtpa, aggregates capacity

of more than 5 mmtpa and ready-mix concrete capacity of 3.5 million cubic meter.

Following the business restructuring which took place in 2017, Lafarge Africa decided to consolidate the

operations of Atlas Cement Company Limited (Atlas) and United Cement Company of Nigeria (UNICEM) with

the Company with effect from 22 December 2017. AshakaCem Plc, Lafarge Ready Mix Nigeria Limited and

Lafarge South Africa Holdings (Pty) Limited remain as 100% owned subsidiaries of the Company. Lafarge

Africa Plc also owns a 35% interest in Continental Blue Investment (CBI), Ghana. CBI is involved in

development, financing and operation of a cement grinding plant in Ghana.

AshakaCem Plc (AshakaCem) was incorporated in Nigeria on 7 August, 1974 as a private limited company.

The company commenced production in 1979 as a cement manufacturing and marketing company.

AshakaCem was formed by Nigerian Industrial Development Bank Limited (defunct), the Nigerian Bank for

Commerce and Industry (defunct), Northern Nigeria Investment Limited and the Government of the then

North-Eastern State (now Adamawa, Bauchi, Borno, Gombe, Taraba and Yobe States). AshakaCem was

converted into a public company and its shares were quoted on the Nigerian Stock Exchange (NSE) in July

1990. The Company currently has an installed production capacity of 1 million metric tons per annum.

AshakaCem has 11 depots and three liaison offices in Nigeria spread across the North. Following a series of

acquisition, tender offers and shareholders’ approval to delist the company from the official list of the NSE in

April 2017, Lafarge Africa Plc. currently holds 100% equity stake in AshakaCem.

Lafarge Ready Mix Nigeria Limited (Ready-Mix) is a 100% owned subsidiary of Lafarge Africa Plc. Ready-mix

was established in 2010 to meet the demand for already prepared concrete mix in large construction sites.

The company commenced operation in September 2011 as the first commercial ready-mix concrete business

in Nigeria. Leveraging the Group's over 50 years of experience in concrete and aggregates business, Lafarge

Africa Plc through its Ready-Mix business produces quality and innovative concrete and aggregates

solutions. Ready-mix operates currently in Lagos, Abuja, Port-Harcourt and Ewekoro and plans are underway

to spread to some states of Nigeria in the near future.

Lafarge South Africa Holdings (Pty) Limited (LSAH) is 100% owned by Lafarge Africa Plc and has two

subsidiaries – Lafarge Industries South Africa and Lafarge Mining South Africa. Through these subsidiaries,

LSAH serves the South African building materials market and its environs with a total cement installed

capacity of 3.6 mmtpa, operating about 21 aggregates quarries, 53 ready-mix concrete plants and 6 mobile

ready-mix plants with a combined capacity in excess of 3 million cubic meters.


Lafarge Africa Plc

Board Composition and Structure

As at 31 December 2017, Lafarge Africa had an eleven-member Board of Directors, comprising the Chairman

(Mr. Mobolaji Balogun), the Vice Chairman (Mr. Guillaume Roux), the Group Managing Director/CEO (Mr.

Michel Puchercos) and eight other Non-Executive Directors. Subsequent to year end, three directors including

Mr. Guillaume Roux resigned from the Board with effect from 6 April 2018. On 7 April 2018, Ms. Geraldine

Picaud, Mr. Christof Hassig and Mr. Grant Earnshaw were appointed to replace the outgone directors.

In order to ensure that it effectively discharges its governance and oversight roles, the Company ’s Board is

supported by five sub-committees, namely: Finance & Strategic Planning Committee; Nomination &

Remunerations Committee; Risk Management & Ethics Committee; Property Optimisation Committee; and

Statutory Audit Committee.

Table 1: Current Directors

Mr. Mobolaji Balogun Chairman

Mr. Michel Puchercos Group Managing Director/CEO

Ms. Sylvie Rochier Non-Executive Director

Mr. Adebode Adefioye Non-Executive Director

Mr. Jean-Carlos Angulo Non-Executive Director

Dr. Shamsuddeen Usman CON, OFR Non-Executive Director

Mrs. Elenda Giwa-Amu Non-Executive Director

Mrs. Adenike Ogunlesi Non-Executive Director

Ms. Geraldine Picaud Non-Executive Director

Mr. Christof Hassig Non-Executive Director

Mr. Grant Earnshaw Non-Executive Director Source: Lafarge Africa Plc 2017 Annual Report & Management Presentation

Other Information

As at 31 December 2017, Lafarge Africa’s total assets grew by 14.6% to ₦616.2 billion (2016: ₦537.6 billion),

while total shareholders’ fund stood at ₦264.8 billion. In the financial year ended 31 December 2017, the

Company generated turnover of ₦177.2 billion and recorded a loss after tax of ₦13.2 billion. Lafarge Africa

had a total of 1,086 persons on its payroll as at 31 December 2017 (2016: 899).

As at 31 December 2017, Lafarge Africa Plc’s contingent liabilities in respect of pending litigation and other

claims amounted to ₦1.03 billion (2016: ₦197.9 million). The Company’s Directors are of the opinion that it

is not probable that an outflow of resources will be required to settle these provisional liabilities.

Table 2: Background Information as at 31 December 2017 Authorized Share Capital: ₦5 billion Paid-up Capital: ₦2.788 billion Shareholders’ Funds: ₦264.8 billion Registered Office: 27B, Gerrard Road, Ikoyi, Lagos Principal Business: Manufacturing and marketing of cement products Auditors: KPMG Professional Services*

Source: Lafarge Africa Plc 2017 Annual Report

*Lafarge Africa appointed KPMG as auditors, replacing Ernst and Young who were the auditors for the 2016

financial year only.


Lafarge Africa Plc

FINANCIAL CONDITION ANALYSTS’ COMMENTS

During the financial year ended 31 December 2017, Lafarge merged two of its wholly owned subsidiaries – United Cement Company of

Nigeria Limited and Atlas Cement Company Limited and the Company elected to apply this from 01 January 2017. Therefore, we have

analysed the audited financial statements of Lafarge Africa Plc bearing in mind the impact of the merged figures.

PROFITABILITY In spite of the marginal improvement in the Nigerian macroeconomic climate, demand in the cement market

contracted by 18.2%2 on the back of low infrastructure spending, declining volumes in key off-taker markets

such as real estate and construction as well as the weak consumer spending. Notwithstanding, cement prices

trended upwards to moderate the impact of the weak demand. During the year ended 31 December 2017,

Lafarge’s revenue more than doubled to ₦177.2 billion on account of the impact of the operations of

UNICEM and Atlas Cement merger with the Company as well as the increase in cement prices.

Disaggregating the consolidation effects of the merger, the Company’s revenue effectively grew by 6% year-

on-year (yoy) to ₦92.5 billion in 2017. In the same period, LAP’s cost of sales as percentage of revenue improved marginally to 70% (2016: 73.8%),

due to the growing use of cheaper alternative

energy sources, thus enhancing the Company’s

fuel flexibility across its plants. In addition, the

relative stability in the foreign exchange (FX)

market on the back of the introduction of the

importers and exporters (I&E) window improved

access to FX liquidity for a number of

manufacturing companies in the country. We

however note that the Company recorded

impairment charges of ₦15.8 billion, comprising

the evacuation road constructed for the

Mfamosing plant at UNICEM, Calabar of ₦12.4

billion3 and Kiln Preheater project in AshakaCem

of ₦3.3 billion. Subsequent to year end, cost of sales to revenue ratio moderated to 62% in 30 June 2018 (H1

2018), on the back of cost savings derived from the improved energy mix across LAP’s plant operations. In the FYE 2017, operating expenses rose significantly by 84% to ₦23.5 billion, due to the implementation of

the Company’s turn-around plan which cut across key areas of organisation including marketing, logistics,

industrial operations, energy mix and corporate structure. However, Lafarge’s operating expenses to sales

moderated to 13.3% from 14.6% the previous year due to the enlarged revenue base. Going forward,

Management expects operating expenses to remain stable on the back of the improved logistics strategy and

a more efficient distribution network.

2 Agusto & Co. Research 3 The Cross River State Government refused to reimburse the Company for the road construction after a prior agreement.

24%

17%12%

28%

57% 55%

42%

49%

26%21%

12% 14%

0%

10%

20%

30%

40%

50%

60%

H1 2018 2017 2016 2015

Lafarge Dangote CCNN

Figure 4: Operating profit margin (2015 - Q1'2018)


Lafarge Africa Plc

During the year, LAP recorded an improvement in operating profit margin which inched up to 16.1%, from

11.6% in the previous year due to the enhanced

route-to-market strategies and turn-around plan

adopted in the year. Despite this improvement, the

Company’s operating profit margin is significantly

lower than its peers – Dangote Cement Plc

(Dangote) of 54.8% (2016: 42%) and Cement

Company of Northern Nigeria (CCNN) of 21.8%

(2016: 12%). Subsequent to year end, operating

profit margin rose to 23.9% in H1’2018, due to the

increase in sales volume and the success of the

restructuring. Going forward, Management is

optimistic that Lafarge’s operating profit margin

will close the 2018 year around 35%, following the

aggressive marketing stance and improved route-

to-market strategies. Agusto & Co. however expects operating profit margin to close the year at around 25%

in light of the increasingly competitive cement market in Nigeria.

In the period ended 31 December 2017, Lafarge’s interest expense rose more than five times from previous

year’s to ₦40.9 billion, following the foreign exchange translation losses recorded from the intercompany

loan to UNICEM and increased borrowings. The ratio of interest expense to sales rose to 23% - the highest in

the last decade and amongst its peers. We note that

the Company’s interest expense to sales is higher

than our threshold and we consider this a rating

action trigger as previously noted in our 2017 rating

review. Subsequent to year end, Management has

disclosed plans to de-leverage the Company books

by the 2018 year end with a proposed rights issue of

₦90 billion. The proceeds will be utilised to repay

expensive short term borrowings, thus moderating

financing costs by 2018 year end. Agusto & Co. is of

the opinion that the full impact of the rights issue

and debt restructuring will occur in FYE 2019,

further lowering financing costs in the medium term.

In the FYE 2017, Lafarge recorded a pre-tax loss of ₦7.1 billion on account of the huge financing costs. As a

result, the Company’s profitability ratios (pre-tax return on average equity and return on average assets) were

in the negative territory. We note that LAP is the only cement company which posted negative returns in the

financial year ended 31 December 2017, as Dangote and CCNN posted pre-tax ROE of 35% and 29%

respectively. Overall, the Company’s profitability is weak and requires improvement.

Figure 5: Interest expense to sales (2015 - 2017)

23.1%

7.7%

2.0%

6.3%8.1%

7.1%

0.7% 1.4%

3.5%

0%

5%

10%

15%

20%

25%

2017 2016 2015


Figure 6: Pre-tax return on equity (2015 - Q1'2018)

2%

-2%

6%11%

47%

35%

43%

32%

38.80%

29%

16% 16%

-10%

0%

10%

20%

30%

40%

50%

H1 2018 2017 2016 2015



Lafarge Africa Plc

CASH FLOW While Lafarge Africa Plc’s trade terms are largely on cash basis, the Company also offers credit sales not

exceeding 30 days to well-established customers who meet its credit policy. Lafarge also enjoys favourable

terms of trade with its suppliers with average trade creditors’ period ranging from 30 to 60 days. In 2017,

LAP’s average number of days of trade receivables and trade payables stood at 7 days and 58 days

respectively.

During the financial year ended 31 December 2017, Lafarge Africa Plc recorded an operating cash flow (OCF)

of ₦48.9 billion - representing over 265% increase from prior year. Although the Company recorded an after

loss of ₦13.2 billion which adversely impacted operating cash flows during the year, the improvement in

OCF was attributed mainly to the surge in amount due to related parties (which was boosted by inter-

company loans) as well as the simultaneous reduction in amount due from related parties in the period

under review. Nonetheless, LAP’s OCF in 2017

was insufficient to cover returns to providers of

finance of ₦57 billion, comprising interest

(72%) and dividend (28%). In addition, the

Company’s three-year (2015 – 2017) average

OCF as a percentage of returns to providers of

financing of 127% fell below our expectation.

In 2017, Lafarge Africa Plc’s OCF as a

percentage of sales of 28% (which is the same

as the three-year average) surpassed our

benchmark. We reckon that the Company’s

adjusted principal payback4 (non-interest

bearing debt to OCF ratio) of approximately 2

years in 2017 is within our benchmark.

In the six months (unaudited) accounts ended 30 June 2018 (H1’2018), LAP generated an operating cash flow

of ₦20.9 billion, representing 21% of H1’2018 sales. Although this depicts a good cash position, the

Company’s H1 2018 OCF was not enough to cover interest payments amounting to ₦22.2 billion during the

period.

Although Lafarge Africa Plc’s operating cash flow was satisfactory in 2017, the overall cash flow profile of

the Company requires improvement, in our opinion.

4 Adjusted for inter-company loans which have been re-classified as amounts due to related parties

Figure 7: OCF/Returns to Finance Providers

61%

86%

116%

0%

20%

40%

60%

80%

100%

120%

140%

H1 2018 2017 2016


Lafarge Africa Plc

FINANCING STRUCTURE AND ADEQUACY OF WORKING CAPITAL

As at 31 December 2017, Lafarge Africa’s working assets stood at ₦52.5 billion, representing a 23% decrease

from prior year. The drop was due mainly to the reduction in amount due from related parties occasioned by

the elimination of UNICEM’s inter-company loans of ₦30.4 billion following the Company’s reorganisation

during the year. The major components of the working assets as at same date were stocks (47%), amount due

from related parties (21%), other debtors & prepayments (16%) and trade debtors (7%).

As at the end of 2017, the Company’s spontaneous financing (non-interest bearing liabilities) increased by

105% to ₦224.5 billion (2016: ₦109.6 billion), due primarily to the increase in amount due to related parties

(which included inter-company loans) and this accounted for 75% of the total. The other major components

of LAP’s spontaneous financing were other creditors & accrual (12%) and trade creditors (9%). Similar to the

last five years, Lafarge Africa’s spontaneous financing was sufficient to cover working assets, leaving a short-

term financing surplus of ₦172 billion as at FYE 2017.

In a bid to address its working capital challenges, Lafarge Africa concluded a Rights Issue of ₦131 billion in

December 2017 which was fully subscribed. The

rights issue generated cash proceeds of only

₦19.4 billion from minority shareholders, while a

portion of the LafargeHolcim’s quasi-equity loan

valued at ₦112.2 billion was used to acquire the

outstanding rights issue.

As at 31 December 2017, Lafarge Africa Plc’s long

term assets stood at ₦522 billion, representing a

13% rise over prior year. As at the same date,

LAP’s long term funds of ₦329.7 billion,

comprising equity (80%) and long term borrowing

(20%), were insufficient to cover the long term

assets, thereby leaving a long term financing need of ₦192.3 billion. We note that the Company’s short term

financing surplus of ₦172 was not adequate to cover this long term financing need, leaving an overall

working capital deficiency of ₦20.3 billion as at FYE 2017 (2016: ₦16.2 billion). This deficiency was covered

with short term borrowings, similar to prior year.

As at H1’2018, Lafarge recorded a short term financing surplus and long term need of ₦161.6 billion and

₦187.7 billion respectively. This resulted in an overall working capital deficiency of ₦26.1 billion as at end

of H1’2018.

Subsequent to year end, Lafarge Africa plans to offer another rights issue of ₦90 billion to repay the short

dated expensive borrowings. While this is a laudable initiative, we are of the opinion that Lafarge Africa’s

financing structure still requires improvement, as the projected amount from the new rights issue will not be

sufficient to offset the Company’s long term financing need.

Figure 8: Long Term Financing Need

(188) (192)

(57)(48)

(250)

(200)

(150)

(100)

(50)

-

H1 2018 2017 2016 2015

In B

illi

on

Nai

ra


Lafarge Africa Plc

LEVERAGE Lafarge Africa Plc’s total liabilities stood at ₦351.4 billion as at FYE 2017, comprising non-interest bearing

liabilities (64%) and interest bearing liabilities (36%). Agusto & Co. has re-classified the US dollar-

denominated loans from related parties5 amounting to ₦143.8 billion as non-interest bearing liabilities

(NIBL) owing to the substance and nature of the inter-company debts. Of the total NIBL of ₦224.5 billion,

amount due to related parties accounted for 75%, while other creditors & accrual (12%) and trade creditors

(9%) were the other main components as at FYE 2017.

LAP’s interest bearing liabilities (IBL) of ₦126.9 billion comprised short term borrowings (including current

portion of long term debts) of 49% and long term debts (51%). The short borrowings were basically bank

overdrafts and commercial papers with interest rates ranging from 16.53% to 17.01%. The long term debts

included the outstanding balance on the ₦12.46 billion 10-year facility from Central Bank of Nigeria/Bank of

Industry-arranged Power & Aviation Intervention Fund which was accessed through a commercial bank at a

fixed interest rate of 7% payable quarterly. The long term debts also comprised the ₦60 billion bullet bond

issued in two tranches of ₦26.38 billion and ₦33.6 billion in 2016 at interest rates of 14.25% and 14.75%

maturing in 2019 and 2021 respectively. While the interest is payable semi-annually, the principal is

repayable upon maturity.

As at 31 December 2017, Lafarge Africa’s

total assets were funded by total liabilities

(57%) and shareholders’ fund (43%), thus

depicting a fairly satisfactory equity cushion.

As at the same date, LAP’s net debt to total

assets ratio at 56% is considered satisfactory.

As at FYE 2017, the Company’s interest

expenses amounted to ₦40.9 billion, 30% of

which was due largely to net foreign

exchange loss arising from the translation of

UNICEM’s US dollar denominated loans and

other intercompany foreign transactions. As a

result, Lafarge’s interest expenses to sales ratio of 23% in 2017 (2016: 7.7%) as well as its interest coverage

ratio of 1.2 times both fell short of our expectations.

While Lafarge’s net debt to total assets ratio at 56% is considered satisfactory as at H1’2018, other key

leverage indices such as interest expense to sales ratio at 22% and interest coverage ratio at 1.3 times fell

short of our benchmarks.

In our opinion, Lafarge Africa Plc has high leverage.

5 The related parties include Caricement B.V. (US$96.19 million) and Holderffin Netherland (US$260.2 million)

Figure 9: Interest expense to Sales & Interest Coverage

22%23%

8%

0.9

1.2

2.0

0.5

1.0

1.5

2.0

5%

10%

15%

20%

25%

H1 2018 2017 2016

Inte

rest

co

vera

ge r

atio

(in

tim

es)

Inte

rest

ex

pe

nse

s to

sal

es

rati

o

(%)


Lafarge Africa Plc

OWNERSHIP, MANAGEMENT & STAFF

As at 31 December 2017, Lafarge Africa Plc’s authorised share capital stood at ₦5 billion, divided into 10

billion ordinary shares of 50 kobo each. As at same date, the Company’s issued and fully paid-up share

capital amounted to ₦2.788 billion (representing 5,575,776,000 ordinary shares of 50 kobo each). As at FYE

2017, LafargeHolcim was the largest institutional shareholder accounting for 72.46% equity stake in the

Company. Other minority shareholders accounted for the balance of 27.54% as at that date.

During the year under review, Lafarge launched an offer to raise ₦131.6 billion by way of a rights issue of

3,097,653,023 ordinary shares of 50 kobo each at ₦42.50 per share to existing shareholders on the basis of

five (5) new ordinary shares for every nine (9) existing ordinary shares held. At the conclusion of the offer,

the rights issue was fully subscribed and the basis of allotment was duly approved by the Board of Directors

on 28 December 2017. The rights issue generated cash proceeds of only ₦19.4 billion from minority

shareholders who took up a portion of their rights, while the quasi-equity loan due to Caricement B.V.

amounting to ₦112.2 billion was converted into equity for the purpose of acquiring the outstanding rights

issue.

Subsequent to the allotment of the rights issue, LafargeHolcim’s equity holding in the Company increased to

76.3%. These shares are held through the Group’s subsidiary companies as follows: Caricement B.V. (48.5%);

Associated International Cement UK (18.8%); and Lafarge Nigeria Limited (9%). The remaining shares are

held by StanbicIBTC Nominees (3%), Odua Investment Company Limited (2%) and other investors (18.5%).

As at 31 December 2017, Lafarge Africa Plc had an 11-member Board of Directors led by the Chairman, Mr.

Mobolaji Balogun. The Chairman is supported by Mr. Michel Puchercos (who has been the Managing

Director/Chief Executive Officer since March 2016) and eight Non-Executive Directors. Subsequent to year

end, three Non-Executive Directors resigned from the Board and were immediately replaced by Ms. Geraldine

Figure 10: Breakdown of Lafarge Africa Plc’s Current Shareholding Structure

Stanbic Nominees

3.0%

Odua Investment

2.2%

Others

18.5%

Caricement B.V

48.5%

Associated Intl

Cement UK

18.8%Lafarge Nigeria

Limited

9.0%

LafargeHolcim

76.3%

Stanbic Nominees Odua Investment Other

Caricement B.V Associated Intl Cement UK Lafarge Nigeria Limited

Source: Lafarge Africa Plc 2017 Annual Report & Management Presentation


Lafarge Africa Plc

Picaud, Mr. Christof Hassig and Mr. Grant Earnshaw in April 2018.

Lafarge’s management team comprises 11 members, each reporting directly to the MD/CEO. Over 50% of the

management team have worked within the Lafarge Group in various roles before their current positions in

Lafarge Africa Plc. In addition, the other members of the management team have relevant working

experience with some large reputable manufacturing companies. Agusto & Co. notes positively that the

Company’s management team is qualified and experienced.

As at 31 December 2017, Lafarge Africa Plc had 1,086 employees compared to 899 employees in 2016. The

increase in staff number was largely due to the consolidation of UNICEM/Atlas operations with the Company

during the year. In the year under review, the Company’s average cost per employee amounted to ₦14.6

million, while the operating profit (excluding staff costs) per staff stood at ₦41.8 million. Operating profit

(excluding staff costs) per staff could cover the average cost per employee 2.86 times, which in our opinion

indicates satisfactory staff productivity.

Management Team

Mr. Michel Puchercos is the Group Managing Director / Chief Executive Officer. He took over from Mr. Peter

Hoddinott in March 2016. Mr. Puchercos started his career in 1982 at the French Ministry of Agriculture and

served as a Director of Orsan, a subsidiary of Lafarge from 1989. He worked in senior executive positions in a

number of Agro- Food and Chemical Industries in Europe – Jungbunzlauer SA as Executive President from

1992-1994; General Manager of the Cana Group from 1994-1996; and Executive Vice President of Doux, a

leading European Group specializing in poultry from 1996 -1998.

Mr. Puchercos returned to Lafarge in 1998 when he was appointed as Director of Strategy and Information

Systems of the Gypsum division. In 2003, he moved to the Cement Division as Director of Cement strategy,

until his reassignment to Bamburi Cement as Managing Director in September 2005. In 2009 he was

appointed the President and CEO of Lafarge South Korea Japan Operations. Mr. Puchercos is a graduate of

the Ecole Polytechnique (1976) and the Ecole Nationale du Génie Rural, des Eaux et des Forêts (1981).

Mr. Bruno Bayet is the Chief Financial Officer (CFO) of Lafarge Africa Plc. He succeeded Mr. Anders

Kristiansson in October 2016. Mr. Bayet has over 15 years work experience in the materials and construction

industry. Prior to his appointment, he was Manager, Corporate Finance with PwC from 1998 to 2005, and

Senior Analyst in the Investment team of Groupe Bruxelles Lambert from 2005 to 2011. Mr. Bayet was an

executive committee member of Enterprise Generale Malta Forrest (RDC) from 2011 to 2013, specializing in

mining and construction.

He joined Lafarge in 2013 as a Director in AshakaCem Plc and was appointed Chief Financial Officer in

September 2014. He holds a Business Engineering degree from Universite Catholique de Louvain-la-Neuve in

Belgium and completed his Master’s degree in Business Administration at Georgetown University,

specialising in Financial Risks Management.


Lafarge Africa Plc

Table 3: Other members of Lafarge Africa Plc’s senior management team

Abdel-Ileh Chouar Industrial Director

Fidelia Osime Country Organization & Human Resources Director

Folashade Ambrose Medebem Communications, Public Affairs & Sustainable Development Director

Graeme Bride Health & Safety Director

Marlene Kiniffo-Zounon Sales Director

Vipul Agrawal Marketing Director

Bruno S. Hounkpati Logistics Director

Lolu Alade-Akinyemi Procurement Director

Edith Onwuchekwa Legal & Public Affairs Director

Rabiu Abdullahi Umar Managing Director, AshakaCem Plc

Raymond Chambers Head of Aggregates & Concrete Source: Lafarge Africa Plc 2017 Annual Report & Management Presentation


Lafarge Africa Plc

OUTLOOK

Following the difficult operating environment occasioned by the economic recession of 2016, the Nigerian

economy continues its recovery with the country’s real GDP growing by 1.95%6 in Q1 2018, marking the

fourth consecutive quarter of positive growth. This has favourably impacted the Nigerian Cement Industry,

which recorded a real growth of 5.28% in Q1 2018, after periods of contraction. Agusto & Co. expects the

Industry’s growth to be sustained in the near term, driven by the stability in the foreign exchange market,

enormous housing deficit, huge infrastructure gap and significant opportunities for exports.

Lafarge Africa Plc’s turnover grew significantly in 2017 due mainly to the cumulative impacts of price

increases in Q4 2016 and Q2 2017 as well as the merger of the UNICEM and Atlas Cement operations. The

Company consolidated on its topline performance in the first half of 2018 (H1’2018), with turnover growing

by 92.8% yoy7 to ₦100.4 billion (H1 2017: ₦52 billion). The Company intends to ramp up production capacity

in Northern operations, following the acquisition of additional equipment which is expected to boost sales in

the near term. While Agusto & Co. anticipates the full year 2018 sales to grow by 13% yoy to about ₦200

billion, Lafarge’s bottom line will be moderated by high finance costs. Agusto & Co. is also of the view that

heightened competition will continue to influence margins; therefore sustaining market share is critical for

the Company.

Although Lafarge Africa Plc’s operating cash flow was satisfactory in 2017, the overall cash flow profile of

the Company requires improvement, in our opinion. In addition, we do not believe LAP’s reliance on non-

interest bearing liabilities and related parties’ loans to run the Company’s operations is sustainable in the

long term.

In a bid to address the working capital challenges, Lafarge Africa concluded a rights issue of ₦131 billion in

December 2017 which was fully subscribed. The rights issue generated cash proceeds of only ₦19.4 billion

from minority shareholders, while a portion of the parent company’s quasi-equity loan valued at ₦112.2

billion was used to acquire the outstanding rights issue. Subsequent to year end, LAP plans to offer another

rights issue valued at ₦90 billion to reduce the short dated expensive borrowings. While this initiative is

laudable, we are of the opinion that Lafarge’s financing structure still requires improvement.

Lafarge continues to improve its procurement and logistics process, enhance its route-market strategy on the

back of the implementation of the turn-around plan which started in Q4 2016 across the entire business

covering marketing, logistics, distribution and energy optimization. Following the turn-around plan, the

Company has improved its distribution system with the use of innovative technology that aids in optimising

the product delivery process and storage. Management expects this to strengthen LAP’s positioning in the

Industry.

On account of the growing competition in the Industry, we expect the pricing environment to remain stable

in the short term. Agusto & Co. also expects the Company’s operational performance to be sustained , with

6 National Bureau of Statistics (NBS) 7 The growth was due mostly to the increase in volume sales and higher cement prices.


Lafarge Africa Plc

healthy volumes supported by the improving macroeconomic climate, the anticipated increased government

infrastructure spending in H2’ 2018 as well as the Company’s deliberate strategy to sustain capacity share.

Overall, we expect LAP’s profitability to improve marginally, driven by the improved operational efficiency

and enhanced route-to-market strategy. Agusto & Co. expects operating cash flow to be positive, provided

the growth in H1 2018 revenue is sustained and terms of trade remains favourable. In our view, we expect

leverage to taper moderately while working capital deficiency should improve, premised on the success of

the proposed ₦90 billion rights issue in the near term. Therefore, Agusto & Co. expects the Company’s

financial condition to improve in the medium term. Based on the aforementioned we have attached a stable

outlook to Lafarge Africa Plc.


Lafarge Africa Plc

FINANCIAL SUMMARY STATEMENT OF FINANCIAL POSITION AS AT 31-Dec-17 31-Dec-16 31-Dec-15

₦'000 ₦'000 ₦'000

ASSETS

IDLE CASH 41,698,854 6.8% 7,653,851 1.4% 6,476,368 1.7%

MARKETABLE SECURITIES & TIME DEPOSITS - - -

CASH & EQUIVALENTS 41,698,854 6.8% 7,653,851 1.4% 6,476,368 1.7%

FX PURCHASED FOR IMPORTS 2,077,365 0.3% - -

ADVANCE PAYMENTS AND DEPOSITS TO SUPPLIERS 2,820,447 0.5% 2,756,486 0.5% 1,371,083 0.4%

STOCKS 24,910,878 4.0% 11,498,146 2.1% 8,143,267 2.1%

TRADE DEBTORS 3,631,951 0.6% 1,848,128 0.3% 1,928,773 0.5%

DUE FROM RELATED PARTIES 10,887,861 1.8% 50,728,218 9.4% 6,443,308 1.7%

OTHER DEBTORS & PREPAYMENTS 8,159,577 1.3% 1,732,431 0.3% 1,016,067 0.3%

TOTAL TRADING ASSETS 52,488,079 8.5% 68,563,409 12.8% 18,902,498 5.0%

INVESTMENT PROPERTIES

OTHER NON-CURRENT INVESTMENTS 182,088,406 29.6% 243,964,396 45.4% 211,903,225 55.6%

PROPERTY, PLANT & EQUIPMENT 292,872,779 47.5% 114,617,300 21.3% 118,251,256 31.0%

SPARE PARTS, RETURNABLE CONTAINERS, ETC 14,146,953 2.3% 11,066,682 2.1% 7,599,635 2.0%

GOODWILL, INTANGIBLES & OTHER L T ASSETS 32,874,869 5.3% 91,732,574 17.1% 18,139,971 4.8%

TOTAL LONG TERM ASSETS 521,983,007 84.7% 461,380,952 85.8% 355,894,087 93.3%

TOTAL ASSETS 616,169,940 100.0% 537,598,212 100.0% 381,272,953 100.0%

Growth 14.6% 41.0% 11.0%

LIABILITIES & EQUITY

SHORT TERM BORROWINGS 15,037,780 2.4% 15,436,877 2.9% 2,434,475 0.6%

CURRENT PORTION OF LONG TERM BORROWINGS 46,916,223 7.6% 8,447,327 1.6% 1,384,444 0.4%

LONG-TERM BORROWINGS 64,900,757 10.5% 64,014,218 11.9% 5,672,992 1.5%

TOTAL INTEREST BEARING LIABILITIES (TIBL) 126,854,760 20.6% 87,898,422 16.4% 9,491,911 2.5%

TRADE CREDITORS 19,777,538 3.2% 14,225,759 2.6% 21,075,395 5.5%

DUE TO RELATED PARTIES 169,308,267 27.5% 41,618,242 7.7% 3,988,084 1.0%

ADVANCE PAYMENTS AND DEPOSITS FROM CUSTOMERS 2,750,491 0.4% 6,041,157 1.1% 6,386,585 1.7%

OTHER CREDITORS AND ACCRUALS 26,395,680 4.3% 14,285,812 2.7% 9,820,632 2.6%

TAXATION PAYABLE 1,544,949 0.3% 363,625 0.1% 606,850 0.2%

DIVIDEND PAYABLE 3,152,627 0.5% 13,459,412 2.5% 3,406,120 0.9%

DEFERRED TAXATION - 18,031,333 3.4% 18,900,873 5.0%

OBLIGATIONS UNDER UNFUNDED PENSION SCHEMES 1,616,733 0.3% 1,580,307 0.3% 4,994,634 1.3%

MINORITY INTEREST - - -

REDEEMABLE PREFERENCE SHARES

TOTAL NON-INTEREST BEARING LIABILITIES 224,546,285 36.4% 109,605,647 20.4% 69,179,173 18.1%

TOTAL LIABILITIES 351,401,045 57.0% 197,504,069 36.7% 78,671,084 20.6%

SHARE CAPITAL 133,204,760 21.6% 2,740,367 0.5% 2,277,451 0.6%

SHARE PREMIUM 222,272,108 36.1% 217,528,456 40.5% 186,419,988 48.9%

IRREDEEMABLE DEBENTURES - - -

REVALUATION SURPLUS

OTHER NON-DISTRIBUTABLE RESERVES (191,678,961) -31.1% - -

REVENUE RESERVE 100,970,988 16.4% 119,825,320 22.3% 113,904,430 29.9%

SHAREHOLDERS' EQUITY 264,768,895 43.0% 340,094,143 63.3% 302,601,869 79.4%

TOTAL LIABILITIES & EQUITY 616,169,940 100.0% 537,598,212 100.0% 381,272,953 100.0%


Lafarge Africa Plc

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31-Dec-17 31-Dec-16 31-Dec-15

₦'000 ₦'000 ₦'000

TURNOVER 177,170,362 100.0% 87,198,416 100.0% 114,558,245 100.0%

COST OF SALES (124,130,812) -70.1% (64,326,776) -73.8% (70,116,635) -61.2%

GROSS PROFIT 53,039,550 29.9% 22,871,640 26.2% 44,441,610 38.8%

OTHER OPERATING EXPENSES (23,556,251) -13.3% (12,764,710) -14.6% (12,068,835) -10.5%

OPERATING PROFIT 29,483,299 16.6% 10,106,930 11.6% 32,372,775 28.3%

OTHER INCOME/(EXPENSES) 4,363,546 2.5% 16,524,008 18.9% 795,068 0.7%

PROFIT BEFORE INTEREST & TAXATION 33,846,845 19.1% 26,630,938 30.5% 33,167,843 29.0%

INTEREST EXPENSE (40,945,036) -23.1% (6,742,176) -7.7% (2,249,070) -2.0%

PROFIT BEFORE TAXATION (7,098,191) -4.0% 19,888,762 22.8% 30,918,773 27.0%

TAX (EXPENSE) BENEFIT (6,125,435) -3.5% 889,586 1.0% (1,081,378) -0.9%

PROFIT AFTER TAXATION (13,223,626) -7.5% 20,778,348 23.8% 29,837,395 26.0%

NON-RECURRING ITEMS (NET OF TAX) 124,065 0.1% 46,775 0.1% -

MINORITY INTERESTS IN GROUP PAT

PROFIT AFTER TAX & MINORITY INTERESTS (13,099,561) -7.4% 20,825,123 23.9% 29,837,395 26.0%

DIVIDEND (5,754,771) -3.2% (14,904,233) -17.1% (16,397,647) -14.3%

PROFIT RETAINED FOR THE YEAR (18,854,332) -10.6% 5,920,890 6.8% 13,439,748 11.7%

SCRIP ISSUES

OTHER APPROPRIATIONS/ ADJUSTMENTS -

PROFIT RETAINED B/FWD 119,825,320 113,904,430 100,464,682

PROFIT RETAINED C/FWD 100,970,988 119,825,320 113,904,430

Proof - - -

ADDITIONAL INFORMATION 31-Dec-17 31-Dec-16 31-Dec-15

Staff costs (₦'000) 15,874,686 6,914,903 10,903,227

Average number of staff 1,086 899 764

Staff costs per employee (₦'000) 14,618 7,692 14,271

Staff costs/Turnover 9.0% 7.9% 9.5%

Capital expenditure (₦'000) 251,082,180 2,562,936 3,517,347

Depreciation expense - current year (₦'000 71,607,316 5,170,285 5,298,867

(Profit)/Loss on sale of assets (₦'000) - - -

Number of 50 kobo shares in issue at year end ('000) 266,409,520 5,480,734 4,554,902

Market value per share of 50 kobo (year-end) 4,489 4,095 9,680

Market capitalisation (₦'000) 11,959,123,353 224,436,057 440,914,514

Market/Book value multiple 45 1 1

Non-operating assets at balance sheet date (₦'000) 182,088,406 243,964,396 211,903,225

Market value of tradable assets (₦'000)

Revaluation date - Investment properties

Revaluation date - Other properties

Average age of depreciable assets (years) 8 7 6

Sales at constant prices - base year 1985 (₦'000) 698,395 343,731 535,431

Auditors KPMG ERNST &

YOUNG

AWDT

Opinion CLEAN CLEAN CLEAN


Lafarge Africa Plc

CASH FLOW STATEMENT

FOR THE YEAR ENDED Dec-17 Dec-16 Dec-15

₦'000 ₦'000 ₦'000

Operating cash flow (OCF) 48,972,518 13,403,080 - 43,744,188

Less: Returns to providers of finance (57,006,592) (11,593,117) - (15,240,597)

OCF after returns to providers of finance (8,034,074) 1,809,963 - 28,503,591

Non-recurring items 124 47 - -

Free cash flow (8,033,950) 1,810,010 - 28,503,591

Investing activities (132,209,371) (110,657,150) - (35,217,893)

Financing activities 174,164,383 109,977,895 - 10,830,432

Change in cash 33,921,062 1,130,755 - 4,116,130

PROFITABILITY

PBT as % of Turnover -4% 23% 27%

Return on equity -2% 6% 11%

Real sales growth 103.2% -35.8% -1.2%

Sales growth 103.2% -23.9% 8.2%

CASH FLOW

Interest cover (times) 1.2 2.0 19.4

Principal payback (years) - - 0.4

WORKING CAPITAL

Working capital need (days) - - -

Working capital deficiency (days) 42 68 -

LEVERAGE

Interest bearing debt to Equity 32% 24% 1%

Total debt to Equity 117% 56% 24%

IBD net of cash and Equiv. as a % of Equity without rev. 32% 24% 1%

Net Debt/Avg Total Assets Exc. Cash and Rev. Surplus 56% 42% 20%


Lafarge Africa Plc

RATING DEFINITIONS Aaa This is the highest rating category. It indicates a company with impeccable financial

condition and overwhelming ability to meet obligations as and when they fall due.

Aa This is a company that possesses very strong financial condition and very strong

capacity to meet obligations as and when they fall due. However, the risk factors are

somewhat higher than for Aaa obligors.

A This is a company with good financial condition and strong capacity to repay

obligations on a timely basis.

Bbb This refers to a company with satisfactory financial condition and adequate capacity to

meet obligations as and when they fall due.

Bb This refers to a company with satisfactory financial condition but capacity to meet

obligations as and when they fall due may be contingent upon refinancing. The

company may have one or more major weakness (es).

B This refers to a company that has weak financial condition and capacity to meet

obligations in a timely manner is contingent on refinancing.

C This refers to an obligor with very weak financial condition and weak capacity to meet

obligations in a timely manner.

D In default.

Rating Category Modifiers

A "+" (plus) or "-" (minus) sign may be assigned to ratings from ‘Aa’ to ‘C’ to reflect comparative position within the rating category. Therefore, a

rating with + (plus) attached to it is a notch higher than a rating without the + (plus) sign and two notches higher than a rating with the -

(minus) sign.


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www.agusto.com

© Agusto&Co.

UBA House (5th Floor)

57 Marina Lagos

Nigeria.

P.O Box 56136 Ikoyi

+234 (1) 2707222-4

+234 (1) 2713808

Fax: 234 (1) 2643576

Email: [email protected]

http://www.agusto.com/

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